Public Finance Underwriting Conflicts of Interest

Piper Sandler is a national leader in underwriting and distributing bonds for state and local government, not-for-profit and real estate clients. As a participant in public finance underwriting, we are subject to complex and extensive regulation by federal and state regulatory agencies and self-regulatory organizations, including the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB). When acting as an underwriter, MSRB rules require that we provide certain disclosures to issuers of bonds to clarify the role of an underwriter, for example as compared to that of a municipal advisor. These disclosures include, but are not limited to, the following:

Role and Responsibilities

MSRB Rule G-17 requires an underwriter to deal fairly at all times with both municipal issuers and investors. The underwriter’s primary role is to purchase securities with a view to distribution in an arm’s-length commercial transaction with the issuer and it has financial and other interests that differ from those of the issuer. Unlike a municipal advisor, the underwriter does not have a fiduciary duty to the issuer under the federal securities laws and is, therefore, not required by federal law to act in the best interests of the issuer without regard to its own financial or other interests. The underwriter has a duty to purchase securities from the issuer at a fair and reasonable price, but must balance that duty with its duty to sell municipal securities to investors at prices that are fair and reasonable. The underwriter will review the official statement for the issuer’s securities in accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the transaction.


Compensation to an underwriter may be contingent on the closing of the transaction; compensation that is contingent on the closing, or the size, of a transaction presents a conflict of interest in that it may cause an underwriter to recommend (i) a transaction that is unnecessary or (ii) that the size of the transaction be larger than necessary.